all the information, none of the junk | biotech • healthcare • life sciences

Massachusetts Venture Funding Slimmed Down to $194 Million in March, But Healthcare Investing Swelled

It’s no question that March was a disorderly month. Here in New England, 70-degree days were quickly followed by record flooding for the region. The NCAA tournament saw major upsets in nearly every round (only for Duke to win the championship in the end.) Oh, and a little something called healthcare reform was signed into law, after a year of raucous town hall meetings, bitter debate, and talk of baby killers and death panels.

The venture investing patterns in the Bay State last month followed much the same rocky, incongruent path marked by highs and lows. Some sectors rose to heightened levels of dominance, while some disappeared from the startup-investing scheme completely. It all amounted to $194.5 million raised across 17 deals, a slight drop from the month before, when Bay State startups wrapped up $203 million in 26 equity deals. The funding totals made March a pretty average month since we started tracking monthly venture investing in June, thanks to data provided by our New York-based partner CB Insights, a private company intelligence platform. (Five months had higher venture investing totals, and four months fell behind March in dollars raised).

The New England region wasn’t in the only place to experience slowed venture investing last month; Seattle-area deal making fell to $21.3 million across a mere three deals, down from $53.5 million in 10 deals in February. It is worth noting that the 17 transactions in Massachusetts in March tied for the lowest number of deals since we started tracking these numbers. But the fact that March’s 17 deals amounted to about $50 million more than the $145 million raised across 17 deals last June shows that the size of individual transactions might be growing.

If there’s something to brag about from last month, it’s the life sciences sector. Healthcare funding soared to $144.2 million, which represents nearly 75 percent of the venture dollars raised in March. The number of healthcare deals for February and March was even at nine, but the March totals dwarfed the February tally of $89.9 million. All told, healthcare companies

took up the five highest deal slots in March, and the sector pulled in roughly $120 million more than the runnerup category, Internet.

The biggest transaction was the $35.4 million that went to TransMedics, an Andover, MA-based developer of systems for transporting organs for transplant. Foundation Capital, Kleiner Perkins Caufield & Byers, and Flagship Ventures participated in the round, which included about $9 million of convertible debt.

As previously mentioned, Internet came in second as a sector, with $24.2 million across five deals in March. This might represent an encouraging constant: the funding total for Internet startups was nearly identical to the $24.5 million raised across five deals in the sector in February. March’s biggest Internet deal, at $11 million, went to DataXu, a Boston startup whose bidding-oriented system helps online advertisers decide which purchases will best translate to conversions and click-throughs.

We’ll have to wait and see if our list of smaller, “under-the-radar” deals worth less than $1 million make up for the dropoff in venture funding in March. In the meantime, here are a few other observations from the rain-soaked month:

—Energy investing fell off the grid last month, as not one energy startup crossed our funding list. The sector ranked second in February with $39.8 million, the peak of what looked like was its comeback, and we boldly declared that investing in the industry was on the up. That’ll teach us to be so confident.

—Investing in mobile companies slowed from its already low rates, with not a single mobile deal last month. I was surprised, considering the state dubbed March as Mobile Madness Month (a great backdrop for Xconomy’s Mobile Madness Forum). Maybe it won’t be until this month that we see the fruits of that buzz. The sector only had one deal in January, worth $1.2 million, and another one in February, worth $1.3 million.

—Software was another area that took a tumble in March. The industry pulled in a grand total of $10.1 million, in one deal for Akorri Networks, a Littleton, MA-based maker of IT infrastructure management software. That’s less than half the $21.6 million that three software startups raked in during February.

–The one bright spot (aside from the surge in healthcare funding) was the fresh flow of cash for startups in the computer hardware and services space. The sector grabbed only $1.4 million in one deal in February, but boasted more than 10 times that last month. Twin $8 million deals for Framingham, MA-based CorrelSense and Woburn, MA’s SensAble Technologies brought the funding total for the industry to $16 million in March, putting it in third place. SensAble makes 3D and haptic systems for purposes from product design to dental modeling, and CorrelSense develops IT systems for helping businesses monitor transactions and improve the performance of large enterprise applications.